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Handling of municipal cash under fire

| Sunday, Nov. 18, 2001

Pressure is mounting on local officials to tighten controls on public dollars after news broke of missing money in two municipalities.

The arrests of former officials in Swissvale and Wilkinsburg has local government leaders asking, "Could it happen here?"

The answer might depend on who is keeping an eye on community coffers - and on who watches the watcher.

In municipalities such as Shaler, independent auditors monitor every financial move the township makes. Other municipalities rely on employees and elected auditors to oversee multimillion-dollar budgets.

On the local level, tax collectors, treasurers and administrators all have access to municipal money.

There is scant oversight from state government. Without strict controls designed as a check on everyone who handles the public's money, cash can leak out of the system and into officials' pockets.

Last year, former Leetsdale tax collector William T. Hazelbach pleaded guilty to stealing more than $320,000 from the borough and the Quaker Valley School District.

Investigators said Hazelbach took property tax payments and deposited them in his personal bank account over an eight-year period.

He was caught when school officials noticed tax collections from Leetsdale were far behind those of other municipalities in the district.

The news came as a shock to the small riverside community. Hazelbach had been tax collector in Leetsdale for more than 20 years. He was sentenced to 23 months of house arrest and ordered to pay more than $173,000 in restitution.

Leetsdale officials have spent the past year trying to rebuild public trust.

CHECKS AND BALANCES

"You can't even put a value on trust when you're handling taxpayers' money," said Judith Kording, Shaler Township finance director. "You can't even measure it. It's your responsibility to the residents."

Every year, auditors pore over Shaler's financial records, studying money that comes in and goes out.

Auditors send confirmation letters to dozens of randomly selected residents, employees and contractors to ensure township records are right.

"They talk to anybody who sends us money and anybody we send money to," Kording said.

If the numbers don't match, the auditors look for mistakes or mismanagement.

Shaler contracts with the Pittsburgh certified public accounting firm Maher Duessel. The company audits scores of municipalities, school districts, government agencies and nonprofit groups in western Pennsylvania.

"The fact is that it is public money," said Rob Lent, a partner at Maher Duessel. "From the standpoint of the elected officials, I would think they would want to show taxpayers that they are following all of the rules and regulations."

Audits of government entities can take from 60 to 1,000 hours, depending on the size of the budget and extent of the review. Costs can range from $3,000 to more than $80,000, Lent said.

An audit can point out weaknesses in the accounting procedures.

"There needs to be a number of checks and balances," Lent said. "There should be different people checking the same thing."

A single-person system is ripe for problems, Lent said.

"You have situations where one person does everything. They handle the cash receipts, deposit the money, do the bank reconciliation and they record the amounts and write the checks," Lent said. "If you have one person doing everything, there's always the possibility that they can do things that they shouldn't do."

WARNING SIGNS

In Swissvale, former borough Manager Tom Esposito is accused of stealing nearly $800,000 over an 11-year period. Police said Esposito wrote hundreds of extra payroll checks to himself.

There were warning signs, including bounced payroll checks and unpaid utility bills. At one point, power to the borough building was shut off.

Swissvale fell more than $1 million behind in its sewer bill.

Accountant Robert Tomasic, who was hired after borough officials abolished the post of elected auditor, has spent the past five months looking into Swissvale's finances.

"Small municipalities normally have one person who does everything. There are no internal controls," Tomasic said from his Forest Hills office. "If you don't have council members who have financial knowledge, then there's really no one looking over their shoulder."

Swissvale officials are using a new computer system designed to keep council members in the know.

Past practices, including the signing of blank checks, have been eliminated, Tomasic said.

"Swissvale did not have an accounting policy and procedure manual," Tomasic said. "They're not the only ones. A lot of places don't have them."

Accounting practices also are in question in Wilkinsburg, where Gerald Brewer, the former police chief, is accused of stealing $20,000 in seized drug money.

As a result, Wilkinsburg officials have revised the policy about who may handle such cash. Now, two of Wilkinsburg's 38 officers are authorized and trained to handle cash seized during arrests, according to current police Chief Mark Springer. Seized cash is to be vouchered and put in an evidence locker, and the chief is not one of the officers authorized to handle the money.

Previously, cash of more than $50 was put in the chief's custody, placed in the chief's office and signed off by the chief, Springer said.

NOTHING FOOLPROOF

Local policies largely dictate how municipalities deal with money, said Peggy Weible, local government policy specialist at the Governor's Center for Local Government Services in Harrisburg.

Weible and her four-member staff review financial reports from the state's 2,567 municipalities.

Each municipality is required to file an annual audit and financial report with the center by April 1.

The report details budget amounts and is not a means of checking for fraud, Weible said.

"Legislatively, we are not a police force," Weible said. "We use this information for statistical purposes."

Municipalities also are required to file an annual survey of financial condition. The report is used to identify distressed communities.

Neither report gives insight into the accuracy of municipal money management, Weible said.

"Fraudulent things, I don't know how we would pick up on that," Weible said. "That is not what we're looking for."

Unlike school district money, municipal money has little oversight from the state Department of the Auditor General.

The department audits borough and township pension funds every three years. Other municipal finances are not examined.

"We audit state funding, including state-funded municipal pensions," said Tim Tuinstra, spokesman for the Auditor General's office. "We do not audit as a whole city budgets or borough budgets."

Local governments are charged with keeping close tabs on taxpayer dollars, Tuinstra said.

The practice of using elected auditors to monitor finances has come under fire in recent years.

Weible said she was not aware of any standards for elected auditors. She said some lack the skills to deal with complex financial documents, while others are trained accountants.

But Tomasic argued that eliminating elected auditors is not the answer to eliminating fraud.

Even with independent audits and internal controls, there is no foolproof method to safeguard public money, Tomasic said.

"If everybody was honest and trustworthy, nobody would need auditors, and we'd never need policemen," Tomasic said. "Now, it seems we need more policemen and auditors than ever. You hope a person is going to be honest, but you never know. You just never know."

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